US financial journal ‘Barron’s’ tips 20% share rise at Greencore

Food company Greencore may see its shares surge more than 20 per cent in the next year as it benefits from expansion into the fast-growing United States market and bolsters its position in Britain, according to Barron's, the influential US weekly financial publication.

Barron's noted that the US market for convenience foods is growing at a double-digit pace, while Greencore is the UK market leader in the chilled convenience and private-label foods space.

"At the current price, Greencore has a market value of £1.44 billion (€1.7bn) and trades for 16.1 times estimated earnings for 2017. In contrast, the Stoxx Europe 600 index's consumer goods sector trades at a multiple of 21.6," Barron's said in a piece published at the weekend.

‘Lumpy’ performance

Shares in Greencore tumbled in late July as the company, led by chief executive Patrick Coveney, reported that its sales momentum slowed in the three months to June and its US business continued to turn in, what company executives called, a "lumpy" performance.

However, Mr Coveney was upbeat on the US business at the time, saying it had become profitable since March, having posted a small loss in the first half of the year to the end of September. Chief financial officer Alan Williams predicted the unit's mixed quarterly performance would moderate and begin to deliver "high single-digit" to "low double-digit" growth in time as it won new business.

While Greencore's shares have since rallied by about 20 per cent, they were unable to glean much support from the Barron's article, and lost 0.9 per cent to £3.47 in London.

While Barron's said Greencore's recent US performance "looks unimpressive" due to the cost of expansion in the US, where Starbucks and convenience stores group 7-Eleven are its main customers, it should be able to see its sales jump on the other side of the Atlantic from $300 million last year to $1 billion by 2024 if it can "leverage its new facilities and win new accounts".